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Mon, Aug 06, 2007 - Page 10 News List

GM and Ford profits slowly recovering

UPHILL BATTLE US automakers are pushing forward after car sales dipped to their lowest level in more than nine years just last month, industry tracker Autodata said

AFP , DETROIT, MICHIGAN

After two years of cost-cutting, profits are beginning to recover for General Motors and Ford, but a soft economy is sharpening competition in the critical truck segment.

As they head into their annual summer gathering this week in northern Michigan, US carmakers are no longer king of the road: For the first time, foreign rivals rule over their home turf.

The market share for new vehicle sales among US brands dropped to 48.2 percent last month, the first time it has fallen below 50 percent, according to data released ahead of the annual management briefing seminar in Traverse City, Michigan.

Meanwhile, Asian carmakers grabbed 44.6 percent and European competitors took 7.3 percent of the US market.

Overall sales in the US dipped to their lowest level in more than nine years last month, according to industry tracker Autodata.

And sales are not expected to increase much in August, said Paul Ballew, general director of market analysis at General Motors (GM) Corp.

Ellen Hughes-Cromwick, corporate economist at Ford Motor Co, pointed to softening in the economy in recent months.

"Home prices are still falling across the country," she said. The "new-vehicle sales environment clearly remains challenging."

The monthly sales decline came just as GM and Ford were beginning to show signs of recovering from the terrible beating they took over the past two years, when they suffered a combined loss of more than US$25 billion.

Last Tuesday, GM reported an US$891 million quarterly profit, while Ford posted profit of US$750 million.

Chrysler, the third leg of Detroit's Big Three automakers and the just-divested US operations of DaimlerChrysler, is not scheduled to publish its second-quarter earnings until late this month, but last year posted an operating loss of US$1.5 billion.

Since the end of 2005, GM and Ford have cut their payrolls by more than one-third, or by more than 60,000 jobs, as part of their restructurings.

Chrysler has eliminated 6,000 jobs this year in North America as part of its recovery plan.

The decline in market share came as US carmakers slashed sales of vehicles to fleets maintained by daily rental companies as part of efforts to restructure and boost the value of their vehicles in the eyes of finicky, fashion-conscious buyers.

Although US carmakers' long resistance to more stringent fuel-economy standards has begun to weaken, they still depend on sales of pickup trucks and sport utility vehicles (SUV) designed for the relatively inexpensive gasoline prices that prevailed prior to the 2003 US invasion of Iraq.

However, US manufacturers' grip on this critical segment weakened last month, with Japanese leader Toyota reporting record sales. Bob Carter, Toyota Motor sales vice president, said Toyota's pickup truck sales were particularly strong in the center of the country.

"We're hitting our targets," said Carter, who noted Toyota sold more than 21,000 new full-size pickups last month.

Tom Libbey, who is an analyst with J.D. Power & Associates, said that Toyota had clearly been using incentives of more than US$3,500 to help increase sales of the new trucks.

"The truck has only been out four months and they still outsold the [Chrysler] Dodge Ram last month," he said.

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